YEREVAN, April 4 (Noyan Tapan). On February 3, 2003, the Armenian Development Bank (ADB) issued corporate bonds with nominal values of $1,000 and $10,000. This is the first time that corporate bonds are issued in Armenia. As ADB Vice-President Tigran Badanian told NT’s correspondent, the bonds are of a discount type, which means sale at a price below their nominal value and repayment at par. The price margin makes the investor’s income – with an annual yield of up to 8.5%. The Bank pledges to pay off the whole amount of bonds on February 3, 2004. According to Mr. Badanian, the Bank looks forward to attracting investments mainly from middle-class and well-off strata. The average real size of individual deposits in Armenian banks ranges between 500 and 1,000 dollars (300,000 to 600,000 drams) and the nominal value of bonds is set proceeding from this very circumstance. Mr. Badanian said that a total number of 1,000 of 1,000-dollar bonds and 200 of 10,000-dollar bonds have been issued. Bonds totalling of more than 1 million dollars (nominal value) have already been sold. The term of primary placement of bonds was set three months – before May 3, 2003. In the interim, bonds are purchased from the issuer (bank), and the price of bond is fixed for each day in a prescribed manner. During the circulation of bonds in the secondary market (after placement) the bank has the right to set bid and ask prices for bonds at its own discretion, proceeding from tendencies observed on the money market. As for the investors, they are entitled to conclude any deals with bonds (sale and purchase, donation, pawning, etc.) allowed under the current legislation. The Bank also acts as the bonds register keeper, i.e. any deal (transaction) concluded with bonds is registered at the bank (in the register) in order to keep the investor safe from possible loss, liquidation or other undesirable alienations. For transactions realized with bonds the Bank has set internal rules according to which it is ready at any moment to buy out the issued bonds at least at the purchase price paid by the investor (though the issuer is not obliged to do that under the current legislation). This style of work is aimed at building confidence with the investor, which will make it possible in the future to expand application of this particular investment tool. Mr. Badanian said that the Bank offers two types of contracts with bonds to all persons who wish to make fixed-interest investment for the term less than one year – repurchase (repo) agreements and option contracts. In the former case, at the moment of bond placement, an agreement is also signed with the investor wherein the specific date and price of bond repurchase are fixed (in case of breach of agreement the delinquent party is understood to pay a penalty amounting to 1% of the sum). In the case with option contract, the investor obtains a right to sell the bond back to the bank at an earlier fixed price (strike price) on the value date against a corresponding premium. The investor can realize the right at his (her) wish or ignore the deal without any penalty. At the same time, the terms stipulated by the option contract are the Bank’s liability, therefore at the very first instance of the investor the Bank must realize the deal.
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